Coinbase was the talk of Wall Street on Wednesday as the exchange site prepared for its public debut as the largest crypto platform in the U.S, offering a direct listing instead of a conventional opening public offering. The company was launched over ten years ago when Bitcoin was in its infancy. The platforms listing on the stock exchange have been described as a “tipping point” in the industry.
It was reported last week by Coinbase users dealing in Ethereum and Bitcoin that the platform’s revenue happened to reach up to $ 1.8 billion, with the number of verified users being in the millions, (approximately 56 million).
In fact, FundStrat Global Advisors analyst Leeor Shimron referred to Coinbase’s listing as a “watershed moment” moment in all of the crypto industry. Dan Ives, Wedbush analyst also remarked that the listing appeared to be a reflection of cryptocurrencies taking the mainstream route.
It was also implied that Coinbase has become too elevated as a crypto exchange when compared to conventional stock exchanges such as Nasdaq as well as Intercontinental Exchange which is New York Stock Exchange’s parent undertaking.
What Is Coinbase?
Coinbase is a crypto exchange platform that was co-founded in the year 2012 by its new chief executive, Brian Armstrong. Aside from Armstrong, Fred Ehrsam, who is now a director at the platform, was also responsible for the company’s launch. Armstrong has a net worth of $6.5 billion, and that is likely to see an increase if the listing continues to see success.
The platform’s listing went public on Nasdaq on Wednesday, 14th April 2021, briefly garnering a commercial value of above $100 billion.
Coinbase takes 0.5% of each transaction going through its system, for instance, if a user invests in $100 worth of Bitcoin, Coinbase takes its cut of 50 cents. If prices drop for Ethereum or Bitcoin, the commissions that the platform takes also drop.
The fact that Coinbase went public via a public listing means that it steered away from having to go through the usual agreements with large banks buying shares in the thousands in order to promote them. Direct listings enable early investors and the like to convert their stakes into stock that is publicly traded.
The offering was previously described by Lisa Ellis, MoffettNathanson analyst, as “not for the faint of heart”. With that being said, she recognized that a vast majority, i.e., 90% of Coinbase’s revenues are acquired from retail trading directly. Ellis noted that investors must have an investment strategy that has at least a year or three years maximum horizon in Bitcoin.
According to the president of Ally Invest Lule Demmissie, Coinbase shares should ideally attract investors considering joining the cryptocurrency scene with or without purchasing coins.
Last week, David Trainer, CEO of New Constructs, assigned a valuation on Coinbase with happened to be around $18.9 billion. He also argued that it would be facing more competition once the crypto market saw itself mature.
Dan Ives of Wedbush, on the other hand, saw great potential in Coinbase, calling it a “foundational piece of the crypto ecosystem.”